Tuesday 31 December 2013

Woman of the year: Margaret Hodge ?

The key person who has successfully lead the team to hold leaders to account is Margaret Hodge, Chair of the Public Accounts Committee. She has done a sterling job this year. It is fitting for this blog, which was set up to focus on the need for more transparency in business (as a way of building trust and boosting value), to pay tribute to her as the "businessinthebuff's woman of the year" ! The focus for this blog will continue throughout 2014 to focus on the three T's, transparency, fair treatment as ways of building trust.

In the real Honours it is also interesting to see the two whistleblowers for Staffordshire NHS awarded with an OBE and CBE. This recognition is a significant symbol of the need for openness in all organisations to expose poor leadership,inadequate management and appalling behaviours so as to make the appropriate cultural changes to build confidence and engender trust.

Friday 20 December 2013

Merry Christmas Npower's vulnerable customers

Today it is announced that Ofgen is fining Npower £3.5m for "breaching sales rules". In this instance it is because their sales process did not allow customers to compare offers from competitors fairly. (Just for a bit of context, back in October 2011 Npower were fined £2m by Ofgen for failing to handle complaints properly.)

Npower has stated that the latest penalty will be used to help "vulnerable customers" ie those customers on the "warm home discount" who will be given £25 each so it's a good Christmas present for them.

Ofgen states that there are 2 more investigations with the big power companies underway. Along with the financial regulator, the investigations and fines we have seen over the last couple of years have shown their real commitment to getting it right for customers. These companies and the sectors they represent are being damaged significantly in terms of reputation and public trust.  Key elements in building reputation/trust are transparency and fair treatment of stakeholders, to build sustainable long-term value,which is surely what their shareholders want.

To ensure that "conduct risk" is mitigated surely the only long-term, successful strategy has to be deep-rooted and committed cultural change to ensure that everyone behaviours in these large organisations is really geared up to improving customer outcomes.

Merry Christmas.

Wednesday 18 December 2013

Can legislation change the culture of banking, or any organisation?

The Banking Reform bill could be passed before Christmas.This will give the Regulator, the FCA, powers to hold the most senior bankers personally responsible for failure of the banks. A key question has to be will this be a sufficient incentive to change behaviours/conduct ( the core of any culture) for the better?

 A  key part of culture is the taken-for-granted beliefs of people both inside and outside the organisation. Do senior managers really believe that the FCA has the clout and the motivation to call individuals to account? Are there "stories" of people being taken to account so that the threat seems real and meaningful?

 If we look at Gerry Johnson's and Kevan Scholes cultural model, the cultural web, as a way of understanding culture, then the task ahead is not easy. The model looks at 6 key factors of culture. The so-called "hard" (but easier to implement) factors of organisational structures, control systems and power structures and the "soft" factors of stories, routines and rituals, and symbols which underpin the culture. These latter factors are much harder to change and take a lot of time.

2013 has been another horrendous year for banking's reputation. In 2014 it would be good to hear positive stories of how change is genuinely being implemented so that customers are no longer taken for granted and do actually deserve better outcomes simply because it is the right thing to do, generates a more sustainable future and provides competitive advantage rather than being a way of preserving bankers' personal wealth and status.

Thursday 12 December 2013

A bit of theory might help the banks get it right

This is another week where the FCA has found the banks wanting fining Lloyds £28m for "serious failings" in its bonus schemes for banks which saw staff threatened with pay cuts or demotion if targets were not reached.

If you look at some basic ethics theory there may be an explanation as to why the sector keeps on getting it wrong and why they still fail to get it right.

If we look at two kinds of theory, one "deontological" (from the Greek word for "duty") focuses on just doing the "right" thing regardless of the outcomes (consequences). The other, teleological (from the Greek word for "goal") focuses on the concept of the outcome justifies the means ie if you get the right result it doesn' matter HOW you got there.

This latter theory is possibly behind all the poor treatment of staff and customers and all the mis-selling ie the sole focus on "goal"- making profits, regardless of the on-going consequences ie the HOW, the conduct and behaviours. What is needed now perhaps within the banking sector is to adopt the unfashionable deontological theory where measurement and rewards are based on the behaviours which engender "doing the right thing" ALL THE TIME.

That's why this blog is deliberately focused on EVERYDAY ethics and EVERYDAY decision making. It is essentially about the need for cultural change and paradigm shift "HOW we do things around here" or as the FCA states "customers, not sales, must come first".

. The FCA is quite rightly on a war path and as more individuals get fined for getting it wrong eg a former finance director of the Bradford and Bingley has been fined £30,000 today for failing to provide accurate information to the board, this will hopefully now focus the minds of the leaders on making significant change- perhaps these kind of threats of personal financial penalties will prove just as effective for the sector's leaders as their sales staff.

Tuesday 10 December 2013

Customers fiendishly confused again, as the financial watchdog snarls

If you go into a supermarket to buy, say, green tea you are likely to find a plethora of different flavours from Tetley from pure green tea right through to green tea with citrus and spice or cinnamon and honey. The choice, along with so much else on offer by so many brands can get confusing for customers. All you want is a pot of green tea but at least you can walk away or try something new without too much financial outlay.

The pension market, where what most retirees just want is the best income for life (so that they can sit and relax with their well-earned cup of tea) is fiendishly confusing and the buying stakes for customers is much, much higher.

One of the key arguments for ethical business practice is that an organisation (or business sector) is more likely to avoid the scrutiny of the Regulator. So today, the Financial Services Consumer Panel, which works with the FCA, reveals that some firms confuse customers and charge them high commissions when they are out in the market trying to buy an annuity. "The general outcome for consumers is akin to a lottery", exploitative pricing and hidden charges are also discovered.

Compliance with regulation costs business a lot of money. Making the changes to treat customers fairly with clear, simple, transparent pricing and explanations will undoubtedly increase costs initially but with c 400,000 annuities sold each year, building up a reputation for fair, simple and transparent treatment of customers surely makes good, long-term business sense and hopefully will keep the snarling financial watchdog more at bay.

Thursday 5 December 2013

The cost of mis-management, mis-selling and unfair treatment

Yesterday the European Commission fined RBS £324m for Libor rigging. Barclays avoided a fine as they were one of the Whistleblowers, a strange kind of "reward" for bad practice but good incentive for others to come clean.

If you review some of the fines/compensation imposed by the Regulator over the last year or so the argument for everyday business ethics, ie everyday well-considered decisions, is clear. The PPI mis-selling scandal alone has cost the financial services industry c £15bn . The FCA has also fined the likes of Swinton £7.38m, PAS £ 2.8m and CPP £10.5m (with c £1.3bn compensation across the 13 high street banks associated with CPP's mis-selling). This is without even looking at the energy market where the likes of SSE were fined £10.5m earlier in the year, again for mis-selling.

One of the key arguments for business ethics is cost and risk reduction particularly minimising the risk of greater regulation. The FCA's focus on "conduct" now means a much greater emphasis on internal behaviours and the conduct/behaviours of other stakeholders. While these are all judgements about past mis-management/"misdemeanours" the financial services sector really needs to deliver some on-going good news stories sometime soon to build up its tarnished and ever sinking reputation.

Wednesday 4 December 2013

Reputation- it's just a story

"Reputation- it's just a story" was the title of a lecture given by Chris Fill (specialist in corporate reputation) at the University of Huddersfield Business School earlier in the week.

Some of the reasons/benefits Chris gave for managing corporate reputation included attracting quality resources and investment, gaining competitive advantage, differentiation, positioning and driving confidence and innovation.

In the same week, the University of Huddersfield had been named the Times Higher Education "University of the Year" due to its exceptional performance. This follows the award of Times Higher Education "Entrepreneurial University of the Year" in 2012. The university is developing a good story under the leadership of the Vice Chancellor Bob Cryan who has also won the "Inspiring Leader Award" at the Guardian Higher Education awards.

The university is now in the Top 10 of English universities for financial strength and has been declared debt free even though it is expanding its campus under its "building without borrowing" project. It is now in the Top 10 for student satisfaction (NSS 2012) and Top 10 for Graduate Employability. The vision "to be an inspiring, innovative and university of international renown" is well under way and the story is gaining momentum and clearly demonstrates how it might now be reaping the benefits outlined by Chris above.

In complete contrast is the damage the Charity Commission has done to the reputation of charities as the National Audit Commission reports today. Chris Fill mentioned in his lecture a number of reasons why stories get "disrupted", key ones here are managerial incompetence and negligence. The management team are now going to have to divert extra effort and energy into undoing the damage to their story so as to regain and build confidence (and funding) for the charities they represent.

Monday 2 December 2013

Engendering loyalty in the modern world

Professor Steve Van Belleghem states in an article in Brand Republic that customer loyalty is declining and that consumers put less trust in brands and tend to switch brands a lot faster. Modern consumers expect companies to act properly and this means treating customers well, treating employees well and doing good for society. Professor Van Belleghem cites Ben and Jerry as an example of a company that does this.

He then mentions that the key is for "those on the highest rung of the corporate ladder to have a clear vision of the added value their company has to offer and to translate that vision for their employees and customers".

Adding to Van Belleghem's views, it is likely to be even more effective for companies to also translate their vision for all stakeholders so that they can maximise opportunities and value. Transparency (which is now more available through digitisation) and fair treatment of all stakeholders are essential components in the increasingly difficult task of building and retaining trust and loyalty in today's business world.